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December 22, 2010

BT's Legal and Consulting Costs Top $625,000

BurlingtonCityLogo * updated *

The outside consultants hired by the city of Burlington to help it guide Burlington Telecom through an internal restructuring and external reviews by state regulators have cost the utility more than $625,000 since July 1, 2009.

That's according to a memo sent by City Hall officials to City Councilors Paul Decelles (R-Ward 7) Karen Paul (I-Ward 6). The accounting was also made in response to a records request by Seven Days.

In September, I noted in "Fair Game" that Burlington Telecom's financial and regulatory troubles had racked up close to $500,000 in charges. As of December 21, that figure sits at $625,063, according to Scott Schroeder, the city's assistant chief administrative officer.

In all, the city has paid out more than $245,000 for legal and regulatory services, which includes $64,000 toward the recent Larkin and Associates report conducted for the Department of Public Service. DPS officials told Seven Days the full cost of the report was $85,000 and would be billed to Burlington Telecom.

City officials have not yet responded to Seven Days' query about the dollar discrepency discrepancy. *(see below for response)

In addition, two payments for legal and consultancy fees were paid for out of the city's general fund and not direct by Burlington Telecom. One was for $2960 to the firm of Langrock, Sperry & Wool, and another $5740 was paid to Stratum Broadband as part of its work earlier this year analyzing BT's business plan. City officials have not yet said whether those costs were repaid by BT.

According to an agreement with the Public Service Board and as a result of the civil lawsuit against Burlington Telecom, the utility is supposed to pay for all its own expenses without support from taxpayers.

Burlington Telecom has also paid out more than $379,000 to various consultants, including consultants hired to examine BT's operations for the so-called "blue ribbon" committee earlier this year.

The charges will continue to mount, given BT's ongoing regulatory problems and the on-site consultants who are running BT's day-to-day operations.

Dorman & Fawcett receives a base fee of $3000 per week, along with $1600 per day for D&F founder Terry Dorman if he does anything besides manage BT and negotiate with creditors. Other D&F senior staff are paid between $950 and $1600. In addition, Hiawatha, which earlier this year conducted a review of BT's business plan, charges the city a flat fee of $7000 per month as part of its work to restructure BT with Dorman & Fawcett.

Download the memo from the city to the city council: Download Memo_to_City_Council_-_BT_Professional_Services_Final

* Update *

Mayoral assistant Joe Reinert emailed this reply to Seven Days' query regarding the consultancy costs paid for by the city out of it's general fund rather than Burlington Telecom:

The costs allocated to the General Fund are for work associated with fulfilling responsibilities that are directly those of the City of Burlington and are not exclusive to Burlington Telecom. The Dorman & Fawcett costs are for implementing the recommendations of the Blue Ribbon Committee, as approved by the City Council, including the negotiations with CitiCapital on restructuring the lease agreement, the development of an alternative organizational structure, potentially involving a new ownership and governance structure of BT,  seeking private partners, and/or the creation of a new entity.  Further, it is our understanding that much of the D &F financing work is likely to be reimbursed at closing of a new financing.

Additionally, Reinert tells Seven Days that Burlington has incurred no out of pocket costs related to the ongoing civil litigation. These costs are being covered by the city's insurance company, Traveler's.

I don't think that figure includes Leopold's legal bill, which at last check the City is still paying.

Also... DISCREPANCY. Just write these posts in Word or something, it will tell you that you misspelled something immediately and won't take any more time.

Any idea how much the Osier lawsuit is costing taxpayers?

Updated the post with comment from City Hall about the discrepancy (thanks for catching the misspelling in the post). No word yet on the cost of the bill so far, but I'm trying to track it down. The cost, including the cost of Jonathan Leopold's attorney, is being paid by the city's insurer, Traveler's.

Now that Leopold has been told to fight his own battles by the Supreme Court, is Traveler's still footing the bill? Anyone who thinks our premiums aren't going up after this has never collected on an insurance claim before.

Thanks for reporting the numbers Shay. Any more reports about the city's ability to borrow short term. The Amounts that the city is allowed to borrow with out a vote by the taxpayers? Can the city aggregate loans in the cashpool ie borrow for parks& DPW etc? I would imagine that the 17million dollar hole is a drain on day to day expenses. How is Leopold covering the citys nut?

Do not be placated or confused by City Hall's response. The "civil litigation" costs paid by the insurer are $2,650. The other legal fees (paid to McNeil's firm) are $165,465. As to Dorman's fees, there will not likely ever be a financing and even if there is, financing them doesn't mean that we don't pay for them. It just means we pay for them, with interest, over an extended period of time.

This albatross needs to be cast aside now.

This is like some darkly insane monopoly game except nobody's gone to jail.

might be time to start with a hatchet job seeing the Mayor refuses to resign. Eliminate the position of Mayors assistant and let the Mayor answer these financial questions.
Good possibility he would have no numbers.
I propose budget cutting starting with the Mayors Assistant, to help offset these debts the mayor is responsible for. This could help the Mayor decide if is failed administration can survive with only him on ship. Slash/slash/slash.
MR> mayor becomes a victim of his own mistakes.

In response to burdensome and maybe even predatory cable pricing Burlington decides to get into the cable business.

BT costs per subscriber are substantially higher that the competition.

Burlington has no experience running a telecom company (and why should they?) and does a poor job.

Revenues never come close to covering costs.

While this usually means that you simply go out of business, BT got 'saved' by public money, only BT still isn't saved.

All that I have read about this debacle is nit picking at the details, while no one seems to ask the most basic question; Why did a city government think that it could run a telecom business better than established players? Is this the reason government exists? Are cable services Burlington's biggest priority? If Burlington thought that they could be profitable, is this reason enough to go into the business? If they had been profitable, would the city next want to open a grocery store or a dry cleaners?

What is the role of city government and what are the responsibilities of politicians? It seems obvious that the current crop at city hall is no different from any other politician. Point fingers at others. Cite circumstances beyond control (um, ...welcome to the world of commerce?). Deny responsibility and attack anyone who asks pointed questions.

To me this nightmare starts with the basic question - what are the responsibilities of city government? Do these responsibilities include guaranteeing me access to cable?

To me the answer seems quite clear.

Lost in a sea of wrongdoing around BT is the fact that it was originally sold as a "no cost to the taxpayer" proposition. Sound familiar? (*koff* Moran Plant *koff koff*)

Anyone who knows anything about business would have voted no on this thing from the beginning for the reasons Chris mentions. Of course, that doesn't include many people up here, so it was no surprise when it passed.

Apparently, the reason the Progs decided we needed a municipally owned cable network is because the commercial competition wasn't airing Al Jazeera, and we absolutely, positively needed to have that.

Now, four years later, the city is $50 million dollars down the sh__hole. Yay.

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